Oracle to post results in cautious atmosphere

Software giant expected to see earnings gain, but all eyes are on forecast

By

JohnLetzing

SAN FRANCISCO (MarketWatch) -- Oracle Corp. is expected to post a modest gain in earnings when it releases its quarterly report after the market's close Thursday, though wary investors are bracing for signs of economic woes spreading to the technology market.

For the company's fiscal first quarter, which ended in August, Oracle
ORCL, +0.98%
is expected to say it earned 26 cents a share, excluding special items, on $5.42 billion in revenue, according to FactSet Research's analyst survey.

In the corresponding period a year ago, Oracle earned 22 cents a share, excluding special items, on $4.53 billion in revenue.

The August quarter is traditionally a relatively weak period for Oracle, which has developed a broad set of database technology and software applications for large corporate customers. But this year, as the economy has slowed down and the credit crisis worsened, investors and analysts have grown increasing concerned that Oracle's results could be directly affected.

In addition, like other U.S. technology firms, Oracle has had to contend recently with a strengthening U.S. dollar, which may crimp overseas sales.

"Our Q1 estimates are generally in line with consensus expectations, though we are cautious about forward guidance given the weakening economic environment and the potential impact on reported revenue growth and margin expansion from the recent reversal of the currency boosts Oracle has enjoyed over the last few years," analyst Charles Di Bona of Sanford Bernstein wrote in a report to clients this week.

Oracle shares have dipped nearly 20% in the past three months. The stock was trading relatively flat Thursday morning ahead of the report.

FBR Research analyst David Hilal wrote in a note to clients that he expects "the possibility of some softness in [software] license revenues due to a challenging IT spending environment," when Oracle posts its results.

"We would not be surprised to see license revenues miss the consensus and come in at the low end of management's guidance for 10% to 20% [year over year] growth," Hilal wrote.

Davenport & Co. analyst Drake Johnstone said he is lowering estimates for Oracle's sales and profit for both its first quarter and the fiscal year, citing "the potential slow down in the global economy and information technology spending."

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